A purchase order is the first contract to the seller stating that the importer is ready to commit to purchase the goods. A purchase order must be taken seriously since it covers important details between seller and buyer. As an importer or exporter all the negotiations must be settled before the purchase order is issued.
What are the terms and critical points you need to negotiate before placing a purchase order?1- Price:
Price of the product or service you are purchasing is the most important point to negotiate. Clearly described on the PO form the product you are buying and the price per pieces. Always negotiate the lowest price before importing and also compare to same quality elsewhere.
The quantity you are ordering is another point to negotiate. Larger orders might help you to obtain a better price. Clearly list the quantity ordered for each item you are buying and if any quantity variance is acceptable it must be marked clearly. For example “ 5 % more or less variance in shipment quantity is allowed. This is important, especially for the industries where manufacturing the exact quantity is not possible, like garment manufacturing.
It is important, especially when buying from a new vendor to request a sample of the product you want to buy. It is always better to check the quality before final shipping. You can hire a company who can examine the goods before the goods are shipped.
Clearly describe the products you are buying. Size or measurement, color, details, material, etc. must be marked clearly on the purchase order. Describe in detail the product you are buying.
5- Latest ship date:
The latest ship date must be clearly marked on the purchase order. Deciding a ship date is an important point for your on time delivery to your final consumer. For example, if you are importing holiday or seasonal products the imported goods must arrive on time or you will not be able to sell the product. For example, if you are importing school products you need them in your store before school starts. Also, always Check with your freight forwarder the transit time from ship port to destination port for your arrival date calculation and consider unexpected delays like US customs hold or export problem at origin port or any other delays might happen during transportation.
6- Mode of transportation:
It is a very important key point. As a freight forwarding company I have seen many cases where the purchase order wasn’t clearly marked shipment point or shipment method. Either you are buying CIF or FOB or Ex work understand the cost difference between shipment terms. There might be a big extra cost if you are buying FOB Shanghai or Ex- Work Shanghai manufacturer. If your term is ex work clarifies with shipper, item by item which charges will be under your account as there are many different costs involved. Like customs clearance at origin, port charges, trucking, local export documentation charges. Since each country regulation is different and ex work charges might vary. I suggest always buying fob origin port and do not get involved in the cost of transportation from factory to the name FOB port.
Please see my other articles on the MTS blog for more details. “Basic mode mode of international transportation” at http://www.morethanshipping.com/basic-modes-of-international-transportation/ and “landed cost” at http://www.morethanshipping.com/landed-cost/
7- Terms of sale and method of payment:
There are different terms like FOB or CIF or Ex work. For more detail which term is beneficial for your company and which term is safer for payment transaction, please read my other article “payment method for international purchasing” at: http://www.morethanshipping.com/payment-methods-for-international-purchasing/
8 – Shipping specifications:
This is important for you to also calculate your shipping cost, especially when you are trying to fill a container to save on freight cost. Since you are paying the cost for a container it is always your befit to to maximize the load. Shipper can advise exactly how much product should be ordered to fill a container.
9- Marking requirements:
US customs and other government agencies have specific marking requirements. Make sure your purchase order clearly describes the marking requirements for the items or the packaging. Each product imported into the USA needs to have different marking requirements. For the marking requirements, please check with US customs or other government agencies before importing. Read my other MTS article “ Are you importing legally” at: “ http://www.morethanshipping.com/are-you-importing-legally/”
10- Special Instructions:
Clearly mark all special instruction you have for the manufacturer like packaging, labels or any other special instructions. For example the wrong barcode label placement on the box can be a big cost to your company. Once you receive the products you might need to repack the goods because of missing instruction you didn’t provide on the purchase order.
Most importantly, don’t forget to proofread your purchase order before you sent to the manufacturer.